MEDICAL MALPRACTICE

Seated at the conference table in his windowless office last week, Ted Williams looked like a man with a $40 million headache.

For almost a year, Williams has been in charge of Maricopa County's Health Care Agency, which runs the county hospital, neighborhood clinics and various other programs that tend to the ill and needy.

During most of that time, Williams has heard over and over again that the county's health-care system is a black hole. When the county closes the books on its fiscal year at the end of this month, the Health Care Agency is expected to be $40 million in debt.

"I've heard it all," Williams says. "That the agency is uncontrolled, has bad management, is a bottomless pit."
News reports have repeatedly characterized the Health Care Agency--and particularly the county hospital--as a major cause of the county's current financial crisis. As supervisors grapple with a deficit estimated to be anywhere from $50 million to $100 million, the public has been led to believe that runaway health-care costs are a major cause of the county's grim financial picture.

That is not true.
In fact, county budget documents show, for the past three years, the Health Care Agency has been used as a dumping ground for debt. Through accounting maneuvers and bookkeeping sleight of hand, the county's top officials have used the agency to hide a dangerous reality: They were running up tens of millions in deficits.

"It appears that debt was shifted to keep the general fund from running a negative," says Williams, in the government-speak he is accustomed to using.

In translation, Williams is saying that as the county kept running out of cash during the past three years, it effectively raided the Health Care Agency for money to pay its other bills.

Under the leadership of former Board of Supervisors Chairman Jim Bruner and former county manager Roy Pederson, Williams' agency became a pawn in a financial shell game apparently intended to mask the need for a tax increase until Bruner could step down to run for Congress.

As reported earlier in New Times, during Bruner's tenure on the board, the county engaged in a pattern of short-term borrowing and Band-Aid fixes to obscure the fact that its finances were sinking deeply into the red (Dangerous Games, Your Money" April 27.)

During 1993 alone, the county borrowed a total of about $200 million, shuffling debt from one place to another instead of facing up to its rapidly failing financial health.

It is clear that the Board of Supervisors used the shell game to evade legal restrictions on deficit spending. And some county officials now are wondering whether the game played with health-care funds may have crossed the line between cleverness and illegality.

Bruner, now running for Congress in the East Valley, declined through a spokesman to discuss the burgeoning financial crisis. "He doesn't want to spend the rest of the campaign talking about the county," spokesman Paul Walker says.

But for Maricopa County, the bills are coming due. Officials have already been forced to lay off hundreds of employees, and have seen the county's bond ratings downgraded twice because of continuing financial problems.

Supervisors are looking for ways to slash the county's budget for the next fiscal year by 15 percent, and bloody battles loom on the horizon as the board tries to get the books in order.

One of the greatest challenges, officials and onlookers agree, will be cleaning up the mess that was made at the Health Care Agency.

@rule:
@body:Health care represents a huge part of what Maricopa County does for its citizens. While running the county hospital, providing care for the poor and elderly and running neighborhood clinics, the county spends about $440 million a year--more than a third of its $1.2 billion budget--on health-care delivery.

Until 1990, budget documents show, the county had no trouble paying for its health-care system and fulfilling its legal obligation to care for the indigent.

In fact, when the fiscal year's books closed in the summer of 1991, the county hospital had more than $3 million in surplus money, county records show.

But that year, the county's overall finances began to deteriorate. Although tax revenue continued to go up at a steady pace, the county began running out of money to fund all of the services it was providing. But supervisors--particularly Bruner--adamantly refused to increase taxes.

As the financial maelstrom worsened over time, the Health Care Agency became an easy target for county leaders in search of quick fixes.

The reason the agency was chosen lies in the nature of health-care budgets. The county hospital and other health-care departments run on budgets--called "enterprise funds"--that are kept completely separate from the county's general fund.

By law, the general fund must be balanced every year and cannot run a deficit. The enterprise funds, however, can carry debt from one year to the next under certain, very specific circumstances.

Beginning in 1991, records show, the county began taking advantage of that limited flexibility to engage in what would become a pattern of piling up debt that was not easily discernible to taxpayers.

First, the supervisors began slashing the amount of general fund money that it gave to the health-care agencies to provide care for Maricopa County's citizens. Between 1990 and 1993, the amount of tax money given to the Health Care Agency to run the county hospital was cut from just over $40 million to just over $27 million, freeing up money to pay other bills but driving the hospital into debt.